Japan manufacturers less confident as global demand sags

TOKYO -- Japanese manufacturers are increasingly nervous, a major business survey showed Monday, as sagging demand at home and abroad is compounded by fears over the effects of a nasty territorial spat with China.

The Bank of Japan's quarterly Tankan survey found sentiment among large manufacturers fell to "minus three" in September from "minus one" in June.

The figures represent the percentage of firms saying business conditions are good minus those saying they are bad, and are a key measure used by the BoJ in formulating monetary policy.

"Previous data have shown exports were weaker than expected and domestic consumer spending was recovering slower than expected ... but the latest Tankan points to weak foreign demand," he said.

"Towards the end of the year, attention should be paid to how China and other overseas economies will be faring as well as how resilient the domestic economy will be," he said.

Japan's automobile sector was hit by the end of government incentives for consumers to buy energy-saving cars in late September but there still is demand for reconstruction from the 2011 earthquake and tsunami disasters, he said.

Economists expect Japan's economy to have contracted in the July-September quarter but are divided over whether it will sink further in the following quarter.

Morita said he was expecting a little growth in October-December, while Masahiko Hashimoto, an economist at Daiwa Institute of Research, said the risk of two consecutive quarters of contraction — a recession — was growing.

Chinese residents take photos of a smashed Japanese-brand car during an anti-Japan protest in Xi'an, in northwest China's Shaanxi province on Sept. 15, as protests against Japan for its control of disputed islands spread across more than a dozen cities in China and turned violent. (AP)